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THE  OUTLOOK 


An  AddrcM 

H.  u.  Mypcif 

President,  Rock  Island  Lines 


Delivered  at  the  Nineteenth  Annual  Dinner 

of   the   Commercial   Club   of   Kansas  City 

in  Commemoration  of  the  John  Jay  Treaty 

Kansas  City,  Missouri 

November  19,  1913 


0^  J 


r  The  Outlook 

yo  By  H.  U.  MUDGE 

The  subject  assigned  me  offers  a  wide  range  of  possibilities. 
The  "Outlook"  depends  so  much  upon  the  viewpoint. 

In  view  of  the  many  changes  that  are  coming  about  in  the 
regulation  of  our  industrial  and  commercial  life,  he  who  would 
treat  the  subject  at  short  range  and  would  define  the  present 
outlook  with  any  degree  of  certainty  would  be,  indeed,  a  prophet, 
and,  as  we  are  told  that  ' '  a  prophet  is  not  without  honor  except 
in  his  own  country,"  I  prefer  to  treat  the  subject  at  longer 
range,  and  I  will  ask  your  indulgence  while  I  diverge  slightly 
from  the  direct  subject,  and  discuss  briefly  what  appears  to  me 
to  be  the  three  essentials  for  the  ultimate   prosperity  of  this 

country. 

There  is  a  saying  of  Lord  Bacon's  that  has  been  quoted  many 
times,  but  it  so  aptly  and  tersely  states  the  conditions  I  have 
in  mind,  that  I  cannot  refrain  from  repeating  it.  He  said,  in 
the  quaint  language  of  his  time: 

"There  be  but  three  things  which  one  nation  selleth  to 
another:     The  commodity  as  nature  yieldeth  it;  the  manu- 
facture, and  the  vecture,   or  carriage.     When  these  three 
wheels  go,  wealth  will  flow  as  in  a  springtide." 
Nations  were  smaller  in  Lord  Bacon's  day  than  they  are  now, 
but  what  was  then  true  of  nations  is  now  true  of  communities. 
You  men  of  Kansas  City,  and  particularly  you  men  of  the 
Kansas  City  Commercial  Club,  are  engaged  in  a  great  work; 
you  are  building  up  commercial  institutions,  factories  and  vari- 
r>c    ous  industries  giving  employment  to  a  large  number  of  people; 
^    you  are  also  beautifying  the  city  and  making  it  a  comfortable 
and  pleasant  place  in  which  to  live.    It  is  your  business  to  make 
C    the  business  and  social  conditions  of  the  city  attractive,  in  order 
^  that  people  from  other  cities  and  people  from  the  country  will 
^    be  induced  to  locate  within  the  city. 

Hundreds  of  other  commercial  organizations  are  engaged  in 

^^e  same  work  and  you  are  all  doing  a  good  job,  with  the  result 

y    that  the  population  of  the  country  is  being  rapidly  concentrated 

i   in  the  cities.     It  would  seem,  therefore,  that  the  second  of  the 

^   three  items  is  being  well  taken  care  of,  if  not  overworked,  by 

.    the  commercial  organizations. 
"'  We   come   now  to  the  first  item,  i.  e.,  "the  commodity   as 

f    nature  yieldeth  it."    What  are  we  doing  to  increase  the  things 
that  nature  produces? 

S 


In  these  days  when  civilization  and  business  are  so  complex, 
it  is  well  for  us  to  remember  that  Mother  Earth  is  the  source 
of  all  material  wealth,  and  from  her  must  be  drawn  the  neces- 
sities and  luxuries  that  meet  our  physical  needs.  These  come 
from  the  mine,  the  forest  and  the  soil. 

When  a  mine  is  exhausted,  there  is  nothing  left  but  a  hole  in 
the  ground;  when  a  forest  is  cut  over,  it  takes  at  least  two 
generations  to  raise  a  new  crop,  but  the  soil  annually  produces 
its  priceless  contribution  to  human  needs  and  will  continue  to  do 
so  indefinitely,  if  properly  and  scientifically  treated. 

Farming  is  mankind's  greatest  industry,  and  the  soil  its 
greatest  physical  asset.  In  agriculture  is  the  hope  of  the  nation. 
It  is  generally  conceded  by  every  authority  upon  the  subject  that 
our  agricultural  methods  must  be  redirected  along  scientific 
lines ;  that  we  must  produce  from  a  given  area  larger  returns,  at 
less  cost,  and  with  less  expenditure  of  manual  labor.  Scientific 
methods  will  enable  the  farmer  to  do  this.  The  need  for  it  is 
shown  by  the  ever-increasing  cost  of  living.  Population  is 
rapidly  overtaking  production. 

We  now  consume  ninety-one  per  cent  of  our  wheat  and  ninety- 
eight  per  cent  of  our  corn.  Exporting  of  food  products  is  reach- 
ing the  vanishing  point.  Six  years  ago  we  exported  525,000 
cattle;  last  year  we  exported  only  105,000,  a  loss  of  seventy-five 
per  cent  in  six  years.  The  number  of  beef  cattle  in  this  country 
six  years' ago  was  51,500,000.  It  is  now  approximately  36,000,000, 
a  loss  of  about  thirty  per  cent.  In  fifty  years  from  now,  when 
the  population  of  this  country  has  reached  200,000,000,  it  may 
be  a  serious  question  what  we  will  eat. 

The  average  yield  of  wheat  for  ten  years  in  the  United  States 
is  fourteen  bushels  per  acre ;  the  average  yield  per  acre  in  west- 
ern Europe  is  thirty-two.  The  average  yield  at  our  experimental 
stations  is  thirtj'-two  bushels  per  acre,  showing  that  what  has 
been  done  in  Europe  can  be  approximated  here. 

The  agricultural  colleges  and  experimental  stations  have  done 
a  great  deal  toward  the  education  of  young  farmers.  Many  of 
the  railway  companies  have  also  done  a  great  deal  of  experi- 
mental work,  and  have  met  with  great  success,  but  this  work 
only  reaches  those  farmers  who  are  enterprising  enough,  or  who 
have  the  time,  to  attend  the  lectures  and  demonstration  trains. 
The  urgent  necessity  is  that  this  scientific  knowledge  and  demon- 
stration shall  be  carried  onto  each  and  every  farm,  and  into  each 
and  every  farm  home. 

The  farmer  must  be  shown  that  he  can  do  this  work  scien- 
tifically himself;  that  he  can  raise  on  his  own  farm  the  same 

4 


average  crops  that  are  g^o^vn  on  the  experimental  farms  and 
do  it  with  less  labor  than  he  is  now  expending,  lie  should  also 
be  shown  that  the  farm  home,  and  the  social  conditions  of  the 
farm,  can  be  made  just  as  comfortable  and  attractive  as  the 
conditions  in  the  cities,  and  this  must  be  done  if  the  young  men 
and  women  are  to  be  induced  to  remain  on  the  farms. 

When  this  is  accomplished,  the  problem  is  solved,  and  not 
before.  Farming  is  a  difficult  and  intricate  business  and  must 
have  scientific  aid  if  the  best  results  are  to  be  obtained. 

The  Lever  Agricultural  Extension  Bill,  now  before  Congress, 
is  the  most  practical  law  that  has  been  suggested  for  this  pur- 
pose. This  law  provides  that  a  trained  farm  demonstrator,  or 
scientific  and  practical  farmer,  be  placed  in  every  agricultural 
county  at  public  expense,  to  take  to  the  farmer  the  latest  and 
best  methods  to  employ  in  his  vocation. 

I  am  assured  by  the  President  of  the  National  Soil  Fertility 
League  that  this  bill  will  undoubtedly  become  a  law  in  the  early 
regular  session  of  Congress.  It  will  then  remain  only  for  the 
states  to  take  up  legislation  that  will  complete  the  plan,  and 
this  is  where  the  commercial  organizations  can  be  of  great  assist- 
ance. When  completed,  it  will,  in  my  judgment,  be  the  most 
beneficial  legislation  that  has  been  enacted  in  the  last  half 
century.  Thus,  I  consider  that  the  "Outlook"  for  agricultural 
prosperity  is  very  bright. 

Having  met  the  problem  of  increased  soil  production,  we 
come  now  to  the  third  problem,  viz.,  distribution,  or,  the  move- 
ment of  the  things  that  nature  yieldeth  either  direct  to  the 
consumer  or  to  the  places  where  it  is  to  be  prepared  for  human 
consumption  and  its  movement  from  those  points  to  the  farmer 
or  other  consumer,  wherever  he  may  be  located,  and  this,  to  my 
mind,  is  the  most  difficult  problem  of  the  three. 

In  this  country,  where  there  are  practically  no  inland  water- 
ways, this  must  be  met  by  rail  transportation.  Without  an  ade- 
quate system  of  transportation  that  can  move  quickly  and  regu- 
larly the  produce  of  the  soil,  the  mine  and  the  forest  to  the 
points  where  it  is  prepared  for  use,  and  from  these  points  to 
destination  or  points  of  consumption,  more  scientific  farming 
and  manufacturing  will  avail  us  nothing,  and  this  problem  is  the 
most  difficult  because  of  its  magnitude.  It  cannot  be  accom- 
plished by  individuals,  or  in  small  units,  but  requires  the  aggre- 
gate capital  of  hundreds  of  thousands  of  people. 

On  account  of  its  magnitude,  it  partakes  of  the  nature  of  a 
monopoly,  and  it  is  difficult,  even  under  the  most  liberal  man- 

5 


agement,  for  a  private  monopoly  to  secure   and  maintain  the 
confidence  of  the  people. 

Since  the  signing  of  the  John  Jay  Treaty,  which  this  banquet 
commemorates,  great  and  wonderful  changes  have  taken  place 
in  this  country.  For  more  than  a  half  century  thereafter,  all 
the  territory  west  of  the  Mississippi  River  was  a  wilderness,  and 
in  the  whole  country  there  was  practically  no  mode  of  trans- 
portation. Since  that  time  an  empire  has  been  builded  upon  what 
was  then  considered  an  unreclaimable  desert;  a  great  system  of 
railway  lines  has  been  constructed  mostly  by  private  capital. 
It  has  pushed  out  beyond  population  and  has  been  the  main 
instrument  of  the  people  in  populating  and  developing  this  vast 
country. 

These  railway  lines  were,  however,  cheaply  built  of  very  light 
construction,  which  was  tjien  thought  to  be  adequate  for  the 
prospective  traffic  to  be  handled,  but,  as  the  coimtry  grew,  they 
became  entirely  inadequate.  At  first  they  were  cheaply  main- 
tained and  operated,  because  the  natural  resources  of  the  country 
were  at  the  disposal  of  the  operators  of  these  railways,  the  same 
as  they  were  at  the  disposal  of  other  citizens.  Fuel  was  to  be 
had  for  the  mere  cost  of  taking  it;  ties  and  timber  for  the  mere 
cost  of  taking  and  preparing  for  use.  Wages  were  comparatively, 
low  because  the  cost  of  individual  living  was  low. 

In  more  recent  years,  since  the  natural  resources  of  the  coun- 
try have  been  more  or  less  depleted,  the  cost  of  everything  that 
goes  to  make  up  a  railroad  has  been  enormously  increased,  and 
as  the  cost  of  individual  living  has  increased,  great  increases  in 
wages  of  railway  employes  have  taken  place. 

Furthermore,  the  inadequacy  of  these  early  constructed  rail- 
ways has  made  it  necessary  to  practically  rebuild  them  along 
much  broader  lines — heavier  rails,  heavier  bridges,  double  tracks, 
larger  terminals,  large  union  passenger  stations,  larger  locomo- 
tives, steel  passenger  cars,  electric  headlights  and  many  other 
improvements  made  necessary  by  state  or  federal  laws  have  made 
necessary  the  borrowing  of  large  sums  of  money  for  improving 
the  railway  systems. 

While  in  years  past  some  proportion  of  the  earnings  of  the 
railways  was  put  back  into  the  properties,  still,  it  was  necessary 
to  borrow  enormous  sums  of  money  to  keep  the  transportation 
system  up  to  the  ever-increasing  demands  of  manufacturing, 
commerce  and  agriculture. 

Meanwhile,  everything  purchased  by  the  railways  has  enor- 
mously increased  in  price,  while  the  price  of  the  only  commodity 

6 


which  they  have  for  sale  has  not  increased,  but  has  very  greatly 
decreased.  Passenger  fares  in  practically  all  of  the  western  states 
have  been  reduced  thirty-three  and  one-third  per  cent  during  the 
past  five  years,  and  similar  decreases  have  also  been  made  in 
the  freight  rates.  It  is  no  more  possible  to  reduce  the  purchasing 
power  of  the  dollar  in  all  commodities  except  one,  and  leave  that 
stationary,  or  increase  it  in  that  single  commodity,  than  it  is 
to  change  the  laws  of  gravity. 

For  some  time  past,  practically  all  of  the  new  money  secured 
by  the  railways  has  been  borrowed  at  high  rates  of  interest  and 
bonds  issued  therefor,  it  having  become  impossible  to  sell  fur- 
ther shares  of  stock  to  the  public  at  any  price.  We  are,  it  is 
true,  a  nation  of  borrowers.  The  tendency  is  to  issue  bonds  on 
which  to  secure  funds  for  almost  every  kind  of  improvement, 
but  it  must  be  perfectly  clear  that  this  plan  cannot  go  on  in- 
definitely. 

Whether  it  be  a  farmer,  a  manufacturer  or  a  transportation 
company,  if  every  dollar  put  into  the  property  for  improvements 
and  betterments  is  provided  only  through  the  increase  of  the 
funded  debt,  there  will,  sooner  or  later,  come  an  adverse  year 
when  the  institution  will  find  itself  unable  to  meet  its  fixed 
charges,  but  before  that  time,  it  will  find  itself  unable  to  borrow 
further  funds,  except  at  excessive  rates  of  interest,  if  at  all. 

Some  of  the  railways  have  already  reached  this  point  and 
are  unable  to  secure  funds  on  any  basis,  and  others  are  unable 
to  secure  sufficient  to  take  care  of  their  needed  improvements. 
It  is  as  necessary  for  the  transportation  systems  to  put  back 
into  their  properties  a  fair  portion  of  their  earnings  as  it  is  for 
the  farmer  or  the  manufacturer  to  do  so,  and  this  is  the  only 
possible  means  by  which  a  proper  transportation  system  can 
be  built  up  and  kept  up  by  private  capital. 

This  country  has  the  best  transportation  system,  at  the  low- 
est rates,  and  operated  by  the  highest  paid  employes,  of  any 
system  in  the  world.  It  would  still  have  this  if  a  slight  increase 
was  made  in  the  rates  of  transportation. 

The  railway  stockholders  of  this  country  are  made  up  of 
hundreds  of  thousands  of  all  classes  of  our  citizens.  On  the 
Pennsylvania  Railroad  more  than  one-half  of  the  stockholders 
are  women,  but  I  am  making  no  plea  for  the  stockholders — they 
can  probably  take  care  of  themselves,  and  it  is  because  I  fear 
that  they  will  take  care  of  themselves  and  leave  the  railways 
to  shift  for  themselves,  that  I  am  disturbed  regarding  the  rail- 
way situation. 

K  private   capital   continues   to  be  withheld   from  railway 


3  0112  062003717 

investments,  as  it  is  now  doing,  government  ownership  will  be 
the  only  alternative,  and  while  this  will  probably  be  the  ultimate 
solution  of  the  problem,  I  do  not  believe  the  country  is  ready 
for  it  yet.  Pending  the  time  when  the  people  are  ready  for  that, 
the  splendid  railway  system  which  they  now  have  should  be  kept 
intact  and  improved  in  accordance  with  the  necessities  of  com- 
merce, in  order  that  when  it  is  taken  over  by  the  government,  it 
will  not  have  deteriorated  so  that  the  government  will  have  to 
tax  the  people  for  its  rehabilitation. 

It  may  also  be  set  down  as  a  certainty  that  if  there  is  no 
change  in  the  conditions  when  the  government  does  take  over 
the  railways,  one  of  three  things  must  happen — either  the  rates 
will  be  raised,  wages  reduced  or  the  deficit  will  have  to  be  made 
up  by  taxation. 

Fortunately,  our  people  have  the  experience  of  other  coun- 
tries to  guide  them.  There  is  practically  no  government  owned 
and  operated  railway  in  the  world  that  has  not  increased  its 
freight  or  passenger  rates  during  the  past  five  years  and  there 
is,  I  believe,  more  dissatisfaction  among  the  shippers  on  govern- 
ment railways  than  on  private  railways  in  the  same  countries,  or, 
for  that  matter,  in  any  country. 

The  eastern  railways  have  asked  permission  to  increase  their 
freight  rates  five  per  cent,  and  the  matter  is  now  before  the 
Interstate  Commerce  Commission.  This,  of  itself,  would  not 
recoup  them  for  the  increases  in  wages  that  have  been  made 
during  the  last  five  years,  but  it  would  give  renewed  confidence ; 
would  enable  them  to  renew  purchases  and  improvements,  and 
thus  start  manufacturing  on  a  better  scale. 

There  seems  to  be  no  great  opposition  on  the  part  of  the 
shippers  to  this  increase,  and  it  is  believed  by  those  who  have 
the  situation  in  hand  that  such  a  showing  will  be  made  as  to 
justify  the  Interstate  Commerce  Commission  in  granting  the 
increase.    The  railway  "Outlook,"  therefore,  seems  encouraging. 

Some  of  the  laws  that  have  been  passed  by  the  present  Con- 
gress will,  undoubtedly,  prove  beneficial,  and  others  are  probably 
needed,  but  this  may  be  safely  said,  that  whether  we  have  high 
tariff  or  low  tariff,  an  income  tax  collectible  at  the  source,  a 
change  in  the  currency  laws,  or  whatever  else  may  be  passed, 
the  people  of  this  country  will  go  on  eating,  drinking,  "marry- 
ing and  giving  in  marriage,"  "multiplying  and  replenishing  the 
earth,"  as  they  have  done  in  the  past,  in  spite  of  what  is  said 
to  be  the  worst  currency  system  in  the  world,  and  other  similar 
conditions,  but  they  cannot  live  comfortably  unless  the  products 
of  the  soil  are  increased  to  correspond  with  the  increased  popula- 
tion, and  unless  they  have  the  means  of  preparing  this  produce 
for  consumption  and  the  means  for  carrying  it  from  originating 
point  to  the  point  of  consumption. 

Therefore,  I  place  the  three  problems  referred  to  by  Lord 
Bacon  as  paramount  in  importance  to  all  the  other  commercial 
problems  of  this  country.  "When  these  three  wheels  go  wealth 
will  flow  as  in  a  springtide." 


